Toot! Toot! Do you remember the story of the little engine that could? Great, I want to put you in the mindset of “I think I can. I think I can”. When it comes to starting a savings plan, this is the mindset you need.
To build a substantial nest egg, you do not have to win the lottery, get a huge inheritance from your great aunt, or marry a millionaire. To create a nest egg on which you can retire, you can use the following formula:
Regular Savings x Time = Substantial Nest Egg
The two components of this formula are simple:
Regular Savings
Regular saving is the little engine that could. You do not need big chucks of money at a time, but consistently putting even small amounts of money into a savings plan will add up. By putting the money to work in your savings plan at regular intervals, once a week, a month, or quarter, you use dollar cost averaging.
I can remember when I started my savings plan. I was recently out of college and wanted to invest. I was saving just $25 a month through a DRIP (Dividend Reinvestment Plan). I must say, when I got my first dividend statement of 5 cents, I was super excited. I was showing the statement to everyone that came by my apartment. My girlfriend at the time laughed at me. She could not understand why I was so excited over a nickel. Overtime, as I continued to put my money into the DRIP plan, the dividend amount grew to $1, $5, $50 and over $100 after several years.
Time
The second part of the equation is time. Time is the more powerful variable of the equation and does most of the heavy lifting. And, if you start your savings plan now (if you have not already started a saving plan), it is the easier of the two steps to do. The key part of that phrase is the word now. Again, you need to think like the little engine that could. Even if you feel the mountain is tall and steep, you must remember the mantra, “I think I can. I think I can.” Once you accept this mindset before long, you will be climbing up the mountainside.
Once you accept the mindset of the “little engine that could” you are on your way up the mountainside of creating the nest egg you desire. I often tell clients that once you start a regular savings plan, and begin noticing the powerful effects of compounding then you too will get excited and begin saying, “I knew I could. I knew I could”.
Have you started your savings plan? Are you in the, “I think I can” or the “I knew I could” phase of your savings plan?
Author
Isaac is a Fee-Only (no products sold) Certified Financial Planner® Practitioner. Isaac founded Stalwart Financial Planning with offices in Fayetteville NC and Durham NC. Isaac provides comprehensive planning and investment management services to individuals from all walks of life. Isaac can be reached by phone at 910-867-8464, or by email (iallen@StalwartPlanning.com). Visit him at Stawart Financial Planning www.StalwartPlanning.com.